The Trump administration’s war on reality will make it meaningfully difficult to understand the health of the economy in the coming months. If data is either not being collected or is no longer reliable, now that Trump has fired the head of the Bureau of Labor Statistics as punishment for weak jobs numbers, it’s hard not to succumb to bias or motivated reasoning, on either side of the political divide. So before we get murkier radio signals, we need to assess the numbers we have now, to inform the trends for the future.
Most of this picture is mixed and influenced by a bunch of different factors. But we can say one thing definitively: Hiring has been relatively dormant since Trump took the oath of office. Only 597,000 jobs have been added in the first seven months of the year, a 44 percent drop from the first seven months of 2024, as former Biden economist Heather Boushey notes. The year has seen low hiring and a low quit rate, as people hunker down in the jobs they have. There are fewer entry-level positions and Americans aren’t moving very much for work. That’s a housing story but it’s also a job security story, and the expectations are even worse: The University of Michigan survey shows expectations for a higher unemployment rate next year at the highest level since the Great Recession.
Maybe artificial intelligence is playing a role here, though concluding that for sure seems premature. Or maybe the behavior of the ill-fated Department of Government Efficiency is filtering down to corporate boardrooms. But the most likely reason for sluggish hiring is the tremendous uncertainty from the tariff announcements, regulatory policy, and Trumpian wild cards. An economy based on individual whim is not one where businesses can plan for the future; indeed, 37,000 manufacturing jobs have been lost since the “Liberation Day” tariff announcement in April, and the subsequent flurry of trade adjustments.
I think you can see the consequences of uncertainty come forward in the explosion in corporate stock buybacks; that’s a sign of retrenchment, where money that could be deployed or invested is instead pushed out to shareholders. No wonder markets are near all-time highs while ordinary workers feel miserable.
The only area where this investment retrenchment and uncertainty is not in evidence comes from the insane capital expenditures for AI computing power, which is propping up the economy almost by itself. That’s why municipal pushback to data centers will be one of the more fascinating developments of the next few years. And it’s why we should pay a lot of attention to whether AI is a viable business, whether its gains are accelerating or stagnating, and whether too much of this capacity deployment is on spec and fated to cause a crash. (AI is creating other economic problems, but we’ll touch on those later.)
The insecurity gripping American workers has kept wages stagnant, up just 0.1 percent last month.
Typically in a consumer spending–driven economy, when consumers slow down, so does the economy. So what do we see there? Personal consumption has surprisingly held up, but we have to disaggregate that. We’re seeing a resumption of the “K-shaped” economy, where total spending is buttressed by the top income brackets, while everyone else sinks. Half of all consumer spending is coming from the top 10 percent, and these price-insensitive customers are absorbing higher inflation. Low-income consumers, by contrast, are taking on more credit card debt, the Boston Federal Reserve reports, because they cannot keep up with rising prices. More than three-quarters of all consumers do not expect to spend their usual amount in the next year, a sentiment consistent with a high-inflation economy.
Tariffs are an obvious culprit here, but we have to account for Trumpian bluster. Despite President Trump boasting that we’re taking in “trillions” in tariff revenue, the actual rate of tariffs paid is lower than the average rate calculated by economists. That’s because the favor-trading for exemptions is in full effect, and some substitution has ensued, with higher-tariff countries seeing fewer purchases. As a result, the weighted average from tariffs is only about 9 percent, and remember that imports only represent about 11 percent of U.S. gross domestic product. (Though domestic goods compete with those imports, and higher tariffs give them the ability to raise their prices too, to say nothing of the foreign components in those domestic goods.)
Overall inflation, while lower than the worst-case scenarios of what tariffs would do, was still at its highest level in half a year among core goods in last week’s Consumer Price Index report, and even higher in the Producer Price Index, a measure of wholesale goods. The PPI numbers for July were particularly interesting: Final demand trade services, which is a rough measure of profit margins, shot up to its highest level in over three years.
This suggests that the talk about high inflation from tariffs, and the expectations of high inflation from consumers (which are rising in the latest consumer sentiment survey), are enabling corporations to raise prices. As former Treasury official Kitty Richards said on CNBC last week, “Corporations are actually able to protect their profit margins and even increase their profit margins at times, using inflation and uncertainty as cover for price hikes, even if their costs aren’t going up.”
Now, this is just one month, and it came before the final installation of higher tariff rates. Companies could be building reserves or stocking up in anticipation of lower profit margins down the road. But the growing sophistication of pricing and the exploitation of public narratives have been trends in corporate America since the pandemic. I see no reason for them to just stop now.
The insecurity gripping American workers has kept wages stagnant, up just 0.1 percent last month. (It took the Wall Street Journal editorial board, of all places, to point this out.) That means that wages aren’t keeping pace with prices, which is what really matters with the cost of living.
On top of this, a host of nontariff policy changes are squeezing or poised to squeeze ordinary Americans. The Peterson-KFF Health System Tracker now estimates that the median health insurance plan in the Affordable Care Act marketplaces is going up 18 percent in 2026, and that understates the impact, because the expiration of enhanced ACA premium subsidies will make this feel much worse. Student loan payment resumption bites so deep for the millions of student borrowers that many are just ignoring the bills, which is likely to lead to intrusive collections and garnishing of wages. The Big Tech obsession, fueled by the Trump administration, to frantically build data centers (and keep the stock market high) is leading to soaring electricity prices, which Trump’s policy to kill any renewable source of energy will only worsen.
Last week, the Trump administration revoked the Biden-era executive order on promoting competition throughout the U.S. economy. That document included 72 discrete policy actions that were mostly taken long ago. Revoking the order won’t actually do much of anything in and of itself. But it’s a signal to corporate America that consolidation is de facto allowable, and the impact on prices won’t be policed. Indeed, both antitrust enforcement agencies praised the announcement, which tells you plenty about their future posturing on concentration.
Finally, rank corruption—whether it’s Trumpian self-enrichment or demands for loyalty from corporate America—is a necessarily dampening economic factor. There’s nothing efficient about having to devote some of your corporate treasury to bribery, or making decisions based on what the king determines to be allowable.
There are brighter spots in the economy. Corporate borrowing has become cheaper, which is something of a bet on the health of the business world. Businesses are always going to see lower taxes and fewer regulations as positive, no matter whom this hurts. And we’re going to be flying with at least a little poorer vision from here on out, making it hard to understand future trends.
But you can’t fool the majority of Americans who are worried about their jobs, worried about higher prices for basic necessities, and worried about the impacts of Trump’s policies, which are just going to get worse. Trump was handed a very good economy and, like a private equity firm, started extracting from it bit by bit, poisoning it and stunting its growth. His instincts are turned entirely inward, and the stagflation that we’re seeing is somebody else’s problem.